ADB, World Bank extend more aid

TO SUPPORT RP ECONOMY, FINANCES

The Asian Development Bank (ADB) on Tuesday said it will extend a multimillion-dollar loan for the Philippines to improve its fiscal discipline and investment climate. In a statement, the Manila-based lender said its board of directors approved a $250-million loan to finance the Development Policy Support Program (DPSP) Subprogram 3.

The project aims to help the country achieve higher investment inflows by improving its macroeconomic and fiscal management, strengthening public financial management, reducing corruption and transaction costs of doing business, and scaling up its social safety net programs.

In August, the ADB approved a short-term fiscal loan of $500 million to help the Philippines mitigate the impact of the global economic crisis.

In a separate statement, the World Bank also said it has committed to support the Philippines in financing climate change and environment activities through the Clean Technology Fund (CTF), a joint initiative of the World Bank, the International Finance Corp. and the ADB.

Building on the experience of ongoing projects such as geo­thermal, wind, and wasterwater projects, the World Bank will also support government programs and projects in power, transport, and waste management sectors.

Like many other developing countries, the Philippines’ economic growth momentum lost steam due to the global slowdown.

In the first half of the year, the Philippine economy grew by only 1 percent from 4 percent in the same period last year.

But by year-end, the country’s gross domestic product (GDP)—an indicator of economic performance—may grow by 2.5 percent to 3 percent this year, more optimistic than government projections, Yuwa Hedrick-Wong an economist at Mastercard said.

The government has pegged GDP growth of between 0.8 percent and 1.8 percent for this year.

To boost economic activity, Wong said both the government and the private sector should invest more in infrastructure to attract more investments.

The high consumption rate could also entice investors to do business in the Philippines, Wong said. Household consumption—which is mainly supported by remittances from overseas Filipino workers (OFW)—would contribute to growth, as Filipinos spent 53 percent of their income on food.

Global Source agreed that further stimulus is needed to lift the economy as it expects GDP growth of between 1 percent and 1.5 percent by yearend, before picking up to 3 percent to 3.5 percent next year.

“The economy is not about to return to the pre-crisis trajectory. Instead, we may be looking at a longer horizon in which output growth returns to normal only after another year, at the very least,” the New York-based think tank said.

Inflation is expected to accelerate in September from a historical low of 0.1 percent in August and climb by 3 percent by yearend, well within the Bangko Sentral ng Pilipinas (BSP) target of 2.5 percent to 5.5 percent.

With that, Global Source expects the BSP to keep its present monetary stance until the first half of next year, adding that policy rates are likely to rise in the second half next year to follow actions of the US Federal Reserve.

“Policy reversal by the latter part of 2010 may take place, but such a move would also be heavily influenced by the policy stance of the US Fed which is expected to remain accommodative for as long as there are no convincing signs of an economic revival,” the Global Source said. –Darwin G Amojelar And Maricel E. Burgonio, Senior Reporters, Manila Times